East Anglia: Mixed reaction to Government’s NewBuy home loans scheme

A GOVERNMENT-backed scheme designed to boost demand for newly-built homes got a mixed reception in the East of England yesterday.

Three major mortgage lenders – Barclays, Nationwide and NatWest – have launched new products as part of the NewBuy initiative which aims to encourage the return of 5% deposits rather than the 20% demanded by many lenders since the credit crunch.

The Government will stump up 5.5% of the value of a mortgage on a home worth up to �500,000 while the housebuilder will put up 3.5% to help guarantee mortgage lenders against any losses.

Besides helping first-time buyers to get a foot on the property ladder the scheme will also support existing borrowers seeking to trade-up to a larger home, and the initiative is also expected to create more work in the construction sector.

But Paul Winter, chief executive at the Ipswich Building Society, which already offers 95% mortgages, said yesterday: “While it is great to see the Government are taking the issue seriously, we would only give a cautious welcome to such a proposal.”

He warned that the Government scheme had “the potential to be very complicated”. “We believe that mortgage affordability is a big issue and for this scheme to work it needs to be a simple and understandable process,” he added.

However, Richard Tunnicliffe, East of England regional director at the CBI, said: “Unfreezing the housing market will be a major game-changer in the drive for economic growth, which is why we called on the Government to support home buyers by making it possible for them to take out low-deposit mortgages.”

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He added: “Spring is traditionally a great time for house buying, and I hope it won’t be too long before home buyers benefit from the NewBuy scheme.”